Commentary and Tracking of a Portfolio of Stocks using approach from "The Little Book that Beats the Market" by Joel Greenblatt aka Magic Formula Investing

Saturday, July 16, 2016

Weekend Update 7/16/16

Weekend Update

Good morning everybody. Another week has flown by. Lots on the news front between Turkey, Nice (France) and Pence. Little of it good. Despite the news, the markets continue to levitate. I am now up 7.25%, which is a bit better than the benchmark. I have a couple of hedges in place the last ten days - that has "hurt" my results. But I am sleeping better knowing I have some downside protection.

Interestingly, MFI seems to be working better of late. My MFI Index is now up almost 4% for 2016. While that still trails the benchmark, the gap has been narrowed. That is pretty consistent with my twelve open tracking tranches - they are up an average of 5.2% versus 7.1% for the benchmark.

MFI Select

July is turning out to be a banner month for my select approach.

Date

Differential

MFI
Value

R3K Value

12/1/2012

-2.20%

99,765

101,965

1/1/2013

-1.78%

102,798

104,575

2/1/2013

-2.26%

102,594

104,856

3/1/2013

-2.23%

102,881

105,114

4/1/2013

-0.43%

106,804

107,234

5/1/2013

2.00%

110,423

108,423

6/1/2013

4.75%

115,831

111,085

7/1/2013

4.29%

114,888

110,597

8/1/2013

6.91%

124,799

117,889

9/1/2013

10.46%

124,536

114,079

10/1/2013

19.67%

138,655

118,990

11/1/2013

19.75%

143,514

123,764

12/1/2013

23.70%

150,105

126,405

1/1/2014

26.63%

157,138

130,503

2/1/2014

24.70%

150,619

125,918

3/1/2014

25.66%

158,116

132,458

4/1/2014

30.38%

162,991

132,616

5/1/2014

29.65%

162,428

132,779

6/1/2014

31.44%

167,001

135,559

7/1/2014

39.23%

177,971

138,740

8/1/2014

31.13%

167,054

135,922

9/1/2014

35.90%

177,792

141,892

10/1/2014

29.38%

168,321

138,944

11/1/2014

26.14%

168,810

142,666

12/1/2014

30.22%

176,420

146,198

1/1/2015

28.17%

174,306

146,140

2/1/2015

20.63%

162,833

142,201

3/1/2015

25.15%

175,476

150,324

4/1/2015

29.95%

178,565

148,612

5/1/2015

37.31%

186,655

149,348

6/1/2015

51.53%

202,897

151,371

7/1/2015

62.69%

211,437

148,743

8/1/2015

40.75%

192,117

151,369

9/1/2015

36.41%

178,603

142,195

10/1/2015

43.12%

181,175

138,052

11/1/2015

69.02%

217,959

148,936

12/1/2015

73.49%

223,435

149,946

1/1/2016

63.33%

209,514

146,186

2/1/2016

49.49%

187,428

137,934

3/1/2016

56.48%

194,415

137,934

4/1/2016

47.34%

195,770

148,430

5/1/2016

46.38%

194,301

147,923

6/1/2016

51.44%

201,999

150,558

7/1/2016

50.41%

201,092

150,680

Current

54.07%

207,680

153,611

You can see it is up about 3% in the month and the lead has expanded. Looking at individual names for the month:

LCI +19.5%

CBI +10%

IILG +11.6%

HSII +6%

TDC +8%

VIAB +7%

VEC +10%

HPQ +10%

Some of these are Formula names, not select names. You'll see it has been a good month on that side as well.

8/17/2015

Start

Current

Dividend

Pct
Gain

R3K
Gain

VDSI

$18.66

$16.44

$0.00

-11.9%

3.5%

SALE

$9.34

$8.15

$0.00

-12.7%

3.5%

CSCO

$28.95

$29.82

$0.94

6.3%

3.5%

TGNA

$25.30

$24.43

$0.56

-1.2%

3.5%

HSII

$20.14

$17.88

$0.26

-9.9%

3.5%

Totals

-5.9%

3.5%

11/15/2015

Start

Current

Dividend

Pct
Gain

R3K Gain

LCI

$34.01

$28.42

$0.00

-16.4%

5.9%

SAVE

$34.48

$47.46

$0.00

37.7%

5.9%

PPC

$18.98

$25.17

$2.75

47.1%

5.9%

VEC

$23.60

$31.25

$0.00

32.4%

5.9%

VNCE

$3.99

$5.34

$0.00

33.8%

5.9%

Totals

26.9%

5.9%

2/1/2016

Start

Current

Dividend

Pct
Gain

R3K Gain

VEC

$19.64

$31.25

$0.00

59.1%

12.7%

QCOM

$45.18

$54.75

$1.01

23.4%

12.7%

PERI

$2.45

$1.15

$0.00

-53.1%

12.7%

DEPO

$15.34

$18.81

$0.00

22.6%

12.7%

TDC

$24.02

$27.18

$0.00

13.2%

12.7%

Totals

13.1%

12.7%

5/6/2016

Start

Current

Dividend

Pct
Gain

R3K Gain

BRCD

$7.97

$9.09

$0.06

14.7%

5.7%

CBI

$37.82

$38.01

$0.00

0.5%

5.7%

HSII

$18.51

$17.88

$0.00

-3.4%

5.7%

RHI

$38.51

$39.36

$0.22

2.8%

5.7%

UTHR

$107.99

$110.75

$0.00

2.6%

5.7%

Totals

3.4%

5.7%

Category/Tranche

August

November

February

May

Total

Initial Investment

25,000

25,000

25,000

25,000

100,000

Current Tranche

-5.9%

26.9%

13.1%

3.4%

11.7%

Previous Tranche

11.2%

69.4%

-14.3%

-25.2%

8.3%

Tranche -2

41.4%

14.2%

8.5%

18.3%

20.6%

Tranche -3

14.1%

43.7%

78.3%

33.0%

42.3%

MFI Overall Gain

68.7%

253.0%

87.3%

21.6%

107.7%

Current Balance

42,186

88,251

46,834

30,409

207,680

R3K Current Tranche

3.5%

5.9%

12.7%

5.7%

7.0%

R3K Overall Gain

64.3%

67.1%

50.1%

33.0%

53.6%

R3K Balance

41,072

41,768

37,533

33,238

153,611

Annualized
IRR

14.3%

41.0%

19.9%

6.3%

22.2%

You can see from this table that my open tranches are up 11.7%. That is solid. The benchmark R3K is up 7.0% over the four tranches.

MFI Formula

Kind of a breakthrough month here. I guess Brexit was good.

Date

Differential

Value

R3K Value

10/1/2014

0.00%

100,000

100,000

11/1/2014

1.63%

102,288

100,658

12/1/2014

0.30%

101,375

101,075

1/1/2015

-0.33%

100,664

100,995

2/1/2015

1.67%

101,281

99,611

3/1/2015

3.62%

106,073

102,454

4/1/2015

5.09%

106,781

101,695

5/1/2015

5.78%

107,859

102,077

6/1/2015

5.08%

108,213

103,134

7/1/2015

4.82%

106,423

101,604

8/1/2015

3.71%

107,112

103,404

9/1/2015

4.38%

101,523

97,139

10/1/2015

6.39%

100,703

94,312

11/1/2015

2.93%

104,835

101,907

12/1/2015

-3.48%

99,443

102,926

1/1/2016

-3.36%

96,830

100,012

2/1/2016

-0.72%

93,797

94,367

3/1/2016

4.07%

98,588

94,367

4/1/2016

0.34%

102,371

101,548

5/1/2016

-1.91%

99,774

101,200

6/1/2016

-0.42%

103,145

103,568

7/1/2016

-0.19%

103,022

103,216

Current

1.44%

107,029

105,585

That is a pretty impressive move from 5/1 to current - over 7%. And I am now ahead by 144 basis points. Not a stomp, but over many years, 144 basis points would compound nicely. Certainly being ahead makes it easier to stay the course.

10/1/2015

Start

Current

Dividend

Pct
Gain

R3K
Gain

BKE

$36.83

$25.93

$1.73

-24.9%

12.3%

IQNT

$21.96

$20.52

$0.45

-4.5%

12.3%

QCOM

$53.45

$54.75

$1.49

5.2%

12.3%

CSCO

$26.37

$29.82

$0.94

16.6%

12.3%

CA

$27.30

$34.17

$0.76

27.9%

12.3%

Totals

4.1%

12.3%

12/31/15
Stocks

Start

Current

Dividend

Pct
Gain

R3K Gain

BBY

$30.31

$31.38

$1.01

6.9%

6.4%

GME

$28.34

$27.99

$0.74

1.4%

6.4%

IILG

$15.89

$17.74

$0.24

13.2%

6.4%

PPC

$22.22

$25.17

$2.75

25.7%

6.4%

VIAB

$40.93

$44.28

$0.80

10.2%

6.4%

Totals

11.4%

6.4%

4/1/16
Stocks

Start

Current

Dividend

Pct Gain

R3K Gain

CALM

$51.27

$44.15

$0.44

-13.0%

6.1%

HPQ

$12.10

$13.85

$0.13

15.5%

6.1%

TIME

$15.24

$16.37

$0.19

8.6%

6.1%

IILG

$13.85

$17.74

$0.12

28.9%

6.1%

TSRA

$30.79

$31.95

$0.20

4.4%

6.1%

Totals

8.9%

6.1%

7/1/2016

Start

Current

Dividend

Pct
Gain

R3K Gain

IILG

$16.76

$17.74

$0.00

5.8%

2.0%

VIAB

$44.00

$44.28

$0.00

0.6%

2.0%

CPLA

$53.22

$56.43

$0.00

6.0%

2.0%

HRB

$23.62

$24.27

$0.00

2.8%

2.0%

PBI

$17.69

$18.85

$0.00

6.6%

2.0%

Totals

4.4%

2.0%

Wow, three of my four open tranches are winning.

Category/Tranche

October

January

April

July

Total

Initial Investment

249,820

249,939

250,180

249,728

999,667

Current Tranche

4.1%

11.4%

8.9%

4.4%

7.2%

Previous Tranche

0.5%

11.0%

-0.2%

-12.5%

-0.1%

Tranche -2

0.0%

-

-

-

0.0%

MFI Overall Gain

4.6%

23.7%

8.6%

-8.6%

7.1%

Current Balance

261,204

309,219

271,744

228,128

1,070,295

R3K Current Tranche

12.3%

6.4%

6.1%

-0.3%

6.1%

R3K Overall Gain

11.7%

6.1%

4.9%

-0.3%

5.6%

R3K Balance

279,109

265,199

262,498

249,047

1,055,853

Annualized IRR

2.5%

14.8%

6.6%

-8.3%

5.0%

A new hope.

Dividends & Warrants

Div and Warrants

Start

Current

Dividend

Pct
Gain

Pct Gain
Last Week

June 1
2016

BAC-WTA

$4.90

$3.37

$0.00

-31.2%

-33.6%

-20.6%

AOD

$7.64

$7.54

$1.42

17.3%

14.7%

17.1%

JQC

$7.82

$8.19

$0.40

9.9%

9.9%

8.4%

CSQ

$9.06

$10.31

$1.90

34.8%

32.9%

30.5%

DSL

$18.41

$18.68

$0.15

2.3%

3.9%

0.0%

TGONF

$10.24

$10.00

$1.52

12.5%

11.7%

12.5%

HIG-WT

$21.24

$36.90

$0.00

73.8%

73.8%

75.7%

O

$23.57

$69.84

$18.60

275.2%

277.9%

249.0%

OIBAX

$5.06

$5.86

$2.23

60.1%

59.9%

58.1%

SJT

$8.75

$6.85

$0.19

-19.6%

-14.7%

-14.4%

GLDI

$10.69

$10.74

$0.12

1.6%

3.0%

0.0%

Totals

7.1%

6.5%

9.0%

Bank of America will report next week. Hopefully some good news and I can start eroding that -31.2%. SJT should start benefiting from higher NG prices. If prices go up and the monthly dividend follows, I could make some gains there as well. One typically "good" thing about dividend stocks is that I reinvest all the dividends and when the stock price drops, I get more shares with me repurchase. But that does not work for SJT as their dividend is variable based upon actual results. So when the stocks is the cheapest, I am also getting the smallest dividend typically.

Recent Buy

I did buy some PN at $7.73 this week. EBIX offered to buy them at $9.50 back in June - so I am hoping EBIX comes back with a higher bid. These deals have rarely work for me - but in today's challenged markets, I am going to be looking for more of these special situations that may have asymmetrical returns... the REXI deal was eye-opening to me. I mean REXI announced they were going to look to sell themselves. After a short term spike, the markets (which have the attention span of a fruit fly) gave most of it back. So an investor had a chance for great upside with limited downside.